European Interest Boosts Confidence in US Offshore Wind

(Bloomberg) — European energy companies are considering participating in U.S. offshore wind-farm auctions, a sign of increasing confidence in the viability of marine-based wind power off U.S. shores, according to Arcadia Windpower Ltd. President Peter Mandelstam.

Developers including Spain’s Iberdrola SA, Electricite de France SA and Ireland’s Mainstream Renewable Power Ltd., have filed official “indications of interest” for the first competitive lease auction for U.S. offshore wind farms, scheduled for next year.

U.S. companies have been planning offshore turbines for more than a decade and none have been built. Having large European wind veterans evaluate the lease auctions shows that the “market is real,” said Mandelstam, who ran one of the early players in the industry, Bluewater Wind LLC.

“The Europeans have been doing this since 1991,” Mandelstam said in a telephone interview yesterday. “It’s a badge of honor for the U.S. industry that the Europeans are here.”

The U.S. Interior Department announced Nov. 30 plans to offer leases for wind farms off the coasts of Massachusetts, Rhode Island and Virginia. The auction will be the first for commercial wind energy in federal waters more than three miles (five kilometers) from shore.

The government has also awarded two offshore wind-energy leases, in Massachusetts in 2010 and in Delaware in October, to U.S. companies through non-competitive offers that each involved a single company.

Delaware Lease

The Delaware lease was awarded to NRG Energy Inc. for a project initially developed by Bluewater. Mandelstam sold the company to NRG in 2009.

The U.K.’s Renewable Energy Systems Ltd. and Spain’s Orisol Corp. Energetica SA also filed indications of interest in the U.S. offshore wind market, according to documents from the Interior Department’s Bureau of Ocean Energy Management.

Mandelstam expects the offshore wind industry to evolve similarly to the onshore industry, with smaller developers like Arcadia completing “upfront work” such as negotiating leases and power contracts, and then selling the projects, or stakes in them, to larger companies.

“That has been the model on land, that was the Bluewater model in Delaware, and I expect that that will continue,” Mandelstam said. Arcadia, based in Hoboken, New Jersey, plans to bid for offshore projects on the Atlantic coast “from Maine to the Carolinas,” according to its website. Mandelstam said he owns and funds the company.

Smaller companies are able to bid for power-purchase agreements and pursue permits, Mandelstam said. For later steps, “to have billions of dollars in construction equity and be able to borrow the construction debt, you need to have some sort of relationship with the larger, more established players,” he said.